Superannuation funds are expected to increase their insurance sales in an attempt to expand their service offering to members, says Rice Warner.
The Rice Warner Direct Insurance Report 2015 found that Australia’s $1.526 billion direct risk insurance sector is being challenged by super funds offering group policies.
The direct sector has experienced a 6.5 per cent decline in sales compared to 2013, down to $496.5 million, for the period ending 31 December 2014.
Rice Warner head of consulting and research Jenni Baxter said: “Increased competition has arisen from superannuation funds marketing directly to members to encourage them to increase insurance amounts with no underwriting ... or with minimal underwriting.”
Ms Baxter said the challenge for direct insurers and distributors is to maintain sales momentum and avoid early lapses.
“Such challenges are not new to direct, but mean smaller insurers, who cannot leverage scale, will continue to find it challenging to grow,” she said.
“This picture is unlikely to change in the short term unless a smaller player invests significantly, or technology plays a disruptive role.”
The report found that the pricing of direct products remained stable. However, both retail and group insurance prices rose in response to a spike in claims.
“Overall, the direct market has the key advantage (over retail and group) of greater agility and speed to change.
“It continually tests and re-tests distribution models. With the right focus and technology spend, direct retains the potential to perform well,” Ms Baxter said.
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